INTERNATIONAL & USA PRESS INQUIRIES
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April 21, 2020
Philip Morris International Inc. Reports 2020 First-Quarter Reported Diluted EPS of $1.17 Versus $0.87 in 2019, Reflecting Currency-Neutral Like-for-Like Adjusted Diluted EPS Growth of 30.1%
downloadWithdraws 2020 Full-Year Reported Diluted EPS Forecast Due Solely to Uncertainty Related to COVID-19 Pandemic and Replaces With Quarterly Forecast; Provides 2020 Second-Quarter Reported Diluted EPS Forecast of
2020 FIRST-QUARTER HIGHLIGHTS
- Reported diluted EPS of
$1.17 , up by 34.5%; up by 49.4%, excluding currency - Adjusted diluted EPS of
$1.21 , up by 11.0%; up by 30.1% on a like-for-like basis, excluding currency - Cigarette and heated tobacco unit shipment volume down by 1.2% (reflecting cigarette shipment volume down by 4.4%, and heated tobacco unit shipment volume up by 45.5% to 16.7 billion units); down by 0.6% on a like-for-like basis
- Market share of heated tobacco units in IQOS markets, excluding the
U.S. , up by 1.9 points to 6.6% - Net revenues up by 6.0%; up by 10.0% on a like-for-like basis, excluding currency
- Operating income up by 36.0%; up by 45.6%, excluding currency
- Adjusted operating income up by 25.5% on a like-for-like basis, excluding currency
- Adjusted operating income margin up by 5.1 points to 41.3% on a like-for-like basis, excluding currency
- Total IQOS users at quarter-end estimated at approximately 14.6 million, of which approximately 10.6 million have stopped smoking and switched to IQOS
- During the quarter, PMI declared a regular quarterly dividend of
$1.17 per common share, representing an annualized rate of$4.68 - On
March 30, 2020 , PMI submitted a supplemental premarket tobacco product application (PMTA) for the IQOS 3 tobacco heating device with theU.S. Food and Drug Administration
"During these unprecedented times, our main focus is on the health and well-being of our employees and their families, our commercial partners and the broader communities in which we operate," said
"We started the year with a very strong first quarter, reflecting continued structural growth momentum driven by our smoke-free portfolio and favorable combustible tobacco pricing. We experienced a limited impact on our performance from the early stages of the COVID-19 pandemic, as the onset of government restrictions related to social distancing and travel were generally only implemented in our key markets over the course of March."
"We expect that the pandemic will have adverse impacts on our full-year 2020 business results. Those already observable relate to a severe reduction of our duty-free sales, slower IQOS user acquisition and delayed minimum price enforcement in
"The duration of the pandemic, the magnitude of its economic impact during the government restrictions, and the subsequent speed of recovery are today unknown. As we are currently unable to forecast with reasonable accuracy the impact of these factors for the remainder of the year, we are withdrawing our 2020 reported diluted EPS guidance of at least
"Despite near-term uncertainty, our company is resilient with a robust financial position. I remain as confident as ever in the underlying fundamentals of our business over time and expect PMI to emerge from the current challenges even better positioned to deliver on our smoke-free ambition and reward our shareholders."
COVID-19: Q1 2020 Volume and Financial Impacts on Like-for-Like Change vs. Q1 2019
The estimated impacts of the COVID-19 pandemic on select PMI volume and currency-neutral financial metrics in the first quarter of 2020 are provided in the table below and primarily reflect favorable estimated distributor and trade inventory movements.
|
|
Like-for-Like |
|
Est. Impact |
PMI Total Shipment Volume |
|
(0.6)% |
|
+1.7 p.p. |
Net Revenues |
|
10.0% |
|
+2.0 p.p. |
Adjusted Operating Income |
|
25.5% |
|
+5.6 p.p. |
Adjusted Diluted EPS |
|
30.1% |
|
+6.8 p.p. |
|
|
|
|
|
(1) Changes for Net Revenues, Adjusted Operating Income and Adjusted Diluted EPS exclude currency. |
Explanations and reconciliations to the most directly comparable
COVID-19: Business Continuity Update
Since the onset of COVID-19, PMI has undertaken a number of business continuity measures to mitigate potential disruption to its operations and route-to-market in order to preserve the availability of products to its customers and adult consumers.
Currently, PMI has sufficient access to the inputs for its products and is not facing any significant business continuity issues with respect to key suppliers.
The large majority of PMI's manufacturing facilities globally are currently operational, including all heated tobacco unit factories. Certain cigarette production facilities are temporarily impacted by government-mandated shutdowns or production limitations. Such facilities account for approximately 20% of PMI's total cigarette production capacity worldwide.
Based on current sales trends, there are adequate inventories of PMI finished goods, on average across all markets, of over two months for heated tobacco units, over three months for tobacco heating devices, and over one and a half months for cigarettes. While government-related restrictions have led to complexities in the company's route-to-market in select geographies, PMI does not currently anticipate out-of-stock situations in any major operating income markets and generally expects consumers to have adequate access to its products. In certain emerging markets, potential difficulties for some smaller general trade outlets could lead to temporary localized out-of-stock situations given less developed route-to-market infrastructures.
Currently, PMI has ample liquidity resources through cash on hand, the ongoing cash generation of its business, and continued access to commercial paper. As of
COVID-19: Primary Business Impacts
While the trajectory and duration of the COVID-19 pandemic -- and related government restrictions -- remain uncertain, PMI anticipates three primary areas of impact from temporary changes to its operating environment:
- Reduced Duty-Free Sales: Government travel restrictions and related reductions in passenger travel are having a significant impact on the company's duty-free business, which contributed approximately 4% of total net revenues in 2019 and has relatively high unit margins reflecting its skew to premium brands. As a result of this premium skew, only a portion of the COVID-linked duty-free volume decline is expected to be recovered by the company's own brand portfolio in local markets, and generally at lower margins.
- Delayed IQOS User Acquisition: Lock-down measures and other restrictions limit PMI's ability to engage with adult smokers through the company's field sales forces, as well as company-owned and third-party retail touch-points, and are only partly mitigated by PMI's increasing use of digital tools that enable virtual guided trials and other e-commerce activities. Based on trends since lock-down measures were introduced in various markets, the rate of new user acquisition is expected to be, on average, around 50% lower than anticipated for as long as government restrictions are in place, with variation depending on the level of restrictions by market.
Indonesia - Minimum Retail Price Delay: The Indonesian government has announced that the enforcement of the new minimum price, originally scheduled forApril 1, 2020 , is delayed until June due to COVID-19 restrictions. This is expected to impact retail prices at the low end of the market and related price gaps with PMI's cigarette brands, with a corresponding negative impact on PMI's cigarette market share and timing of pricing.
PMI also anticipates uncertainty as to the general economic impact of the global pandemic and ultimate shape of the recovery, particularly with respect to unemployment, disposable income, consumption and the extent of any down-trading, as well as retail operations in certain developing markets.
2020 FULL-YEAR FORECAST WITHDRAWAL
Given the inherent uncertainty surrounding the COVID-19 pandemic and the related impact on PMI's business globally, the company is currently unable to forecast its full-year financial results with reasonable accuracy. PMI is therefore withdrawing its 2020 reported diluted EPS forecast of at least
The limited impact of COVID-19 on the company's first-quarter 2020 financial results primarily reflected the relatively late-quarter onset of the pandemic in many of PMI's key markets. However, as an increasing number of governments globally have now enforced self-isolation and lock-down measures -- the duration and severity of which remain uncertain -- the company anticipates an adverse impact on its full-year results that cannot be accurately quantified at this time.
Based on data from markets to date, particularly those that were impacted by COVID-19-related government restrictions earlier in the year, PMI believes that the adverse impacts on its business from the pandemic are temporary in nature, mainly subject to the duration of government lock-downs and the subsequent timing of recovery.
2020 SECOND-QUARTER FORECAST
Although the company is unable to assess with reasonable accuracy the impact of COVID-19 on its business over the full year, it has relatively better visibility on the second quarter of 2020.
As initially communicated on
PMI forecasts second-quarter reported diluted EPS to be in a range of
This forecast assumes the following estimated unfavorable EPS impacts in the quarter related to COVID-19:
10 cents for distributor and trade inventory movements, mainly related to reversals from the first quarter;9 cents for lost Duty-Free sales, net of domestic sales recapture, assuming no recovery in global travel in the period;- 5 to
15 cents for the impact of the delay in minimum price enforcement inIndonesia and other COVID-19-related factors, including temporary reductions in daily consumption and down-trading in certain developing markets.
The forecast also assumes:
- a currency-neutral net revenue decline of approximately 8% to 12%, wholly attributable to COVID-19-related factors, including lower IQOS device sales; and
- no additional disruption in the company's ability to supply its customers, based on its current operations and inventory levels.
Until PMI is able to estimate the full-year 2020 impact of COVID-19 on its business with greater certainty, the company plans to continue providing quarterly forecasts on a one quarter forward basis, with the exception of the following items forecasted for the full year:
- capital expenditures of approximately
$0.8 billion , compared to approximately$1.0 billion disclosed previously, with the reduction unrelated to reduced-risk product investments; and - an effective tax rate of approximately 23%, subject to changes in full-year earnings mix.
The forecasts in this press release exclude the impact of any future acquisitions, unanticipated asset impairment and exit cost charges, future changes in currency exchange rates, further developments related to the
Factors described in the Forward-Looking and Cautionary Statements section of this release represent continuing risks to these projections.
Conference Call
A conference call, hosted by
CONSOLIDATED SHIPMENT VOLUME & MARKET SHARE
PMI Shipment Volume by Region |
|
First-Quarter |
||
(million units) |
|
2020 |
2019 |
Change |
Cigarettes |
|
|
|
|
|
|
40,646 |
39,488 |
2.9% |
|
|
21,419 |
20,320 |
5.4% |
|
|
29,996 |
33,304 |
(9.9)% |
South & |
|
37,595 |
41,492 |
(9.4)% |
|
|
12,299 |
12,113 |
1.5% |
|
|
15,063 |
17,580 |
(14.3)% |
Total PMI |
|
157,018 |
164,297 |
(4.4)% |
|
|
|
|
|
Heated Tobacco Units |
|
|
|
|
|
|
4,661 |
2,293 |
+100% |
|
|
4,366 |
1,548 |
+100% |
|
|
470 |
754 |
(37.7)% |
South & |
|
— |
— |
—% |
|
|
7,122 |
6,849 |
4.0% |
|
|
108 |
54 |
+100% |
Total PMI |
|
16,727 |
11,498 |
45.5% |
|
|
|
|
|
Cigarettes and Heated Tobacco Units |
|
|
|
|
|
|
45,307 |
41,781 |
8.4% |
|
|
25,785 |
21,868 |
17.9% |
|
|
30,466 |
34,058 |
(10.5)% |
South & |
|
37,595 |
41,492 |
(9.4)% |
|
|
19,421 |
18,962 |
2.4% |
|
|
15,171 |
17,634 |
(14.0)% |
Total PMI |
|
173,745 |
175,795 |
(1.2)% |
(1) Includes shipments to Altria Group, Inc., commencing in the third quarter of 2019, for sale in |
During the quarter, PMI's total shipment volume decreased by 1.2%, or by 0.6% on a like-for-like basis, principally due to:
Middle East &Africa , reflecting lower cigarette shipment volume, notably inSaudi Arabia andTurkey , partly offset byNorth Africa ;- South &
Southeast Asia , reflecting lower cigarette shipment volume, primarily inIndonesia ,Pakistan andthe Philippines ; and Latin America &Canada , reflecting lower cigarette shipment volume, primarily inArgentina ,Canada (mainly due to the impact of the deconsolidation of RBH), andMexico . On a like-for-like basis, PMI's total shipment volume in the Region decreased by 8.8%;
partly offset by
- the EU, reflecting higher heated tobacco unit shipment volume across the Region, particularly in
Italy , as well as higher cigarette shipment volume, notably inGermany andItaly ; Eastern Europe , reflecting higher heated tobacco unit shipment volume across the Region, notably inRussia andUkraine , as well as higher cigarette shipment volume, mainly inRussia , partly offset byUkraine ; andEast Asia &Australia , mainly reflecting higher cigarette and heated tobacco unit shipment volume inJapan .
First-Quarter Impact of Inventory Movements
On a like-for-like basis, excluding the net favorable impact of estimated distributor inventory movements of approximately 5.4 billion units, PMI’s total in-market sales declined by 3.7%, due to a 6.7% decline in cigarettes, partly offset by a 35.6% increase in heated tobacco units.
The net favorable impact of estimated distributor inventory movements of approximately 5.4 billion units reflected:
- A net favorable impact of 4.7 billion cigarettes, mainly driven by the
EU Region ,Japan ,North Africa , PMI Duty Free andRussia , partly offset bySaudi Arabia ; and - A net favorable impact of 0.7 billion heated tobacco units, mainly driven by the
EU Region andRussia .
PMI Shipment Volume by Brand
PMI Shipment Volume by Brand |
|
First-Quarter |
||
(million units) |
|
2020 |
2019 |
Change |
Cigarettes |
|
|
|
|
|
|
59,245 |
59,963 |
(1.2)% |
L&M |
|
22,641 |
21,816 |
3.8% |
Chesterfield |
|
12,903 |
14,298 |
(9.8)% |
Philip Morris |
|
11,463 |
10,723 |
6.9% |
Sampoerna A |
|
8,548 |
7,901 |
8.2% |
|
|
7,573 |
8,830 |
(14.2)% |
Dji Sam Soe |
|
6,175 |
6,651 |
(7.2)% |
|
|
5,612 |
5,671 |
(1.0)% |
Lark |
|
4,025 |
5,270 |
(23.6)% |
Fortune |
|
2,482 |
3,045 |
(18.5)% |
Others |
|
16,351 |
20,129 |
(18.8)% |
Total Cigarettes |
|
157,018 |
164,297 |
(4.4)% |
Heated Tobacco Units (1) |
|
16,727 |
11,498 |
45.5% |
Total PMI |
|
173,745 |
175,795 |
(1.2)% |
(1) Includes shipments to Altria Group, Inc., commencing in the third quarter of 2019, for sale in |
||||
Note: Sampoerna A includes Sampoerna; Philip Morris includes Philip Morris/Dubliss; and Lark includes Lark Harmony. |
PMI's cigarette shipment volume of the following brands decreased:
Marlboro , mainly due to the GCC,Indonesia ,Mexico andTurkey , partially offset byGermany ,Italy ,Japan ,North Africa andRussia ;- Chesterfield, mainly due to
Argentina ,Russia ,Saudi Arabia andTurkey , partly offset byBrazil ; Parliament , mainly due toRussia andTurkey ;- Dji Sam Soe in
Indonesia , mainly due to Dji Sam Soe Magnum Mild, reflecting adult smoker down-trading to super-low-price brands due to widened price gaps; Bond Street , mainly due toUkraine , partly offset byRussia ;- Lark, mainly due to
Japan andTurkey ; - Fortune in
the Philippines , mainly reflecting the impact of theAugust 2019 price increase, which widened price gaps with competitive brands; and - "Others," notably due to: the impact of the deconsolidation of RBH in
Canada ; mid-price Sampoerna U inIndonesia and Muratti inTurkey ; and low-price Morven inPakistan .
The increase in PMI's heated tobacco unit shipment volume was mainly driven by the EU (notably
PMI's cigarette shipment volume of the following brands increased:
- L&M, mainly driven by
Mexico andNorth Africa (primarilyEgypt ), partly offset bySaudi Arabia ; - Philip Morris, primarily driven by
Japan andRussia , partly offset byArgentina ; and - Sampoerna A in
Indonesia , mainly driven by premium A Mild, notably reflecting reduced price gaps with directly competitive mid and low-price brands.
First-Quarter International Share of Market
PMI's total international market share (excluding
- Total international market share for cigarettes of 25.0%, down by 1.1 points; and
- Total international market share for heated tobacco units of 2.9%, up by 0.9 points.
PMI's total international cigarette sales volume as a percentage of total industry cigarette sales volume was down by 0.8 points to 25.9%, mainly reflecting: out-switching to heated tobacco units, as well as lower cigarette market share, notably in
CONSOLIDATED FINANCIAL SUMMARY
Financial Summary - |
|
|
|
|
|
Change |
|
Variance |
|||||||||||||||
|
2020 |
2019 |
|
Total |
Excl. |
|
Total |
Cur- |
Price |
Vol/ |
Cost/ |
||||||||||||
(in millions) |
|
|
|
||||||||||||||||||||
Net Revenues |
|
$ |
7,153 |
|
$ |
6,751 |
|
|
6.0 |
% |
7.1 |
% |
|
402 |
(74 |
) |
323 |
381 |
(228 |
) |
|||
Cost of Sales |
|
|
(2,402 |
) |
|
(2,465 |
) |
|
2.6 |
% |
0.6 |
% |
|
63 |
|
49 |
|
— |
29 |
|
(15 |
) |
|
Marketing, Administration and Research Costs (2) |
|
|
(1,944 |
) |
|
(2,217 |
) |
|
12.3 |
% |
20.0 |
% |
|
273 |
|
(171 |
) |
— |
— |
444 |
|
||
Amortization of Intangibles |
|
|
(18 |
) |
|
(19 |
) |
|
5.3 |
% |
5.3 |
% |
|
1 |
|
— |
— |
— |
1 |
|
|||
Operating Income |
|
$ |
2,789 |
|
$ |
2,050 |
|
|
36.0 |
% |
45.6 |
% |
|
739 |
|
(196 |
) |
323 |
|
410 |
|
202 |
|
Asset Impairment & Exit Costs (3) |
|
— |
|
(20 |
) |
|
+100 |
% |
+100 |
% |
|
20 |
|
— |
— |
— |
20 |
|
|||||
Canadian Tobacco Litigation-Related Expense (3) |
|
— |
|
(194 |
) |
|
+100 |
% |
+100 |
% |
|
194 |
|
— |
— |
— |
194 |
|
|||||
Loss on Deconsolidation of RBH (3) |
|
— |
|
(239 |
) |
|
+100 |
% |
+100 |
% |
|
239 |
|
— |
— |
— |
239 |
|
|||||
Adjusted Operating Income |
|
$ |
2,789 |
|
$ |
2,503 |
|
|
11.4 |
% |
19.3 |
% |
|
286 |
|
(196 |
) |
323 |
|
410 |
|
(251 |
) |
Adjusted Operating Income Margin |
|
|
39.0 |
% |
|
37.1 |
% |
|
1.9 |
pp |
4.2 |
pp |
|
|
|
|
|
|
|||||
(1) Cost/Other variance includes the impact of the RBH deconsolidation. |
|||||||||||||||||||||||
(2) Unfavorable Cost/Other variance of |
|||||||||||||||||||||||
(3) Included in Marketing, Administration and Research Costs above. |
|||||||||||||||||||||||
Note: Net Revenues include revenues from shipments of Platform 1 devices, heated tobacco units and accessories to Altria Group, Inc., commencing in the third quarter of 2019, for sale under license in |
During the quarter, net revenues, excluding unfavorable currency, increased by 7.1%, mainly reflecting: a favorable pricing variance, notably driven by
Operating income, excluding unfavorable currency, increased by 45.6%, notably reflecting a favorable comparison to charges recorded in the first quarter of 2019 of
Excluding the impact of these 2019 charges, adjusted operating income, excluding unfavorable currency, increased by 19.3%, primarily reflecting: a favorable pricing variance; and favorable volume/mix, primarily driven by heated tobacco unit volume (notably in the EU and
Adjusted operating income margin, excluding currency, increased by 4.2 points to 41.3%, as detailed in Schedule 7, or by 5.1 points to 41.3% on a like-for-like basis, as detailed in Schedule 8.
EUROPEAN UNION REGION
Financial Summary - |
|
|
|
|
Change |
|
Variance |
||||||||||||||
|
2020 |
|
2019 |
|
Total |
|
Excl. |
|
Total |
Cur- |
Price |
Vol/ |
Cost/ |
||||||||
(in millions) |
|
|
|
|
|
||||||||||||||||
Net Revenues |
|
|
|
|
|
|
17.4 |
% |
20.7 |
% |
|
376 |
(70 |
) |
16 |
430 |
— |
||||
Operating Income |
|
|
|
|
|
|
29.2 |
% |
36.5 |
% |
|
262 |
(65 |
) |
16 |
378 |
(67 |
) |
|||
Asset Impairment & Exit Costs |
|
— |
— |
|
— |
% |
— |
% |
|
— |
— |
— |
— |
— |
|||||||
Adjusted Operating Income |
|
|
|
|
|
|
29.2 |
% |
36.5 |
% |
|
262 |
(65 |
) |
16 |
378 |
(67 |
) |
|||
Adjusted Operating Income Margin |
|
45.7 |
% |
41.5 |
% |
|
4.2 |
pp |
5.4 |
pp |
|
|
|
|
|
|
During the quarter, net revenues, excluding unfavorable currency, increased by 20.7%, primarily reflecting favorable volume/mix, mainly driven by higher heated tobacco unit volume across the Region (notably in the
Operating income, excluding unfavorable currency, increased by 36.5%, mainly reflecting: favorable volume/mix, driven by the same factors as for net revenues noted above; and a favorable pricing variance; partly offset by higher manufacturing costs; and higher marketing, administration and research costs, largely related to increased investments behind reduced-risk products.
Adjusted operating income margin, excluding currency, increased by 5.4 points to 46.9%, as detailed in Schedule 7.
Total Market, PMI Shipment & Market Share Commentaries
European Union Key Data |
|
First-Quarter |
||||||
|
|
|
|
Change |
||||
|
|
2020 |
2019 |
% / pp |
||||
Total Market (billion units) |
|
109.3 |
107.4 |
1.8% |
||||
|
|
|
|
|
||||
PMI Shipment Volume (million units) |
|
|
|
|
||||
Cigarettes |
|
40,646 |
39,488 |
2.9% |
||||
Heated Tobacco Units |
|
4,661 |
2,293 |
+100% |
||||
Total EU |
|
45,307 |
41,781 |
8.4% |
||||
|
|
|
|
|
||||
PMI Market Share |
|
|
|
|
||||
|
|
17.7 |
% |
18.2 |
% |
(0.5) |
||
L&M |
|
6.5 |
% |
6.7 |
% |
(0.2) |
||
Chesterfield |
|
5.7 |
% |
5.9 |
% |
(0.2) |
||
Philip Morris |
|
2.6 |
% |
2.8 |
% |
(0.2) |
||
HEETS |
|
3.9 |
% |
2.1 |
% |
1.8 |
||
Others |
|
3.0 |
% |
3.2 |
% |
(0.2) |
||
Total EU |
|
39.4 |
% |
38.9 |
% |
0.5 |
In the quarter, the estimated total market in the EU increased by 1.8% to 109.3 billion units, mainly driven by:
Denmark , up by +100%, mainly reflecting the net favorable impact of estimated trade inventory movements in advance of a significant excise tax increase onApril 1, 2020 . Excluding these movements, the total estimated market decreased by 2.0%; andGermany , up by 3.7%, or down by 1.8% excluding the net favorable impact of estimated trade inventory movements, primarily reflecting the impact of price increases inMarch 2019 ;
partly offset by
France , down by 8.7%, primarily reflecting the impact of significant excise tax-driven price increases inNovember 2019 andMarch 2020 , and a higher prevalence of illicit trade.
Excluding the net favorable impact of estimated trade inventory movements, the estimated total market in the EU was down by 0.4%.
PMI's total shipment volume increased by 8.4% to 45.3 billion units, reflecting:
- higher heated tobacco unit shipment volume across the Region, driven by higher market share (notably in
Germany ,Italy andPoland ) and the net favorable impact of estimated distributor inventory movements (partly driven by distributor inventory increases related to COVID-19, notably inItaly ); and - higher cigarette shipment volume, mainly driven by the net favorable impact of estimated distributor inventory movements (partly driven by distributor inventory increases related to COVID-19, notably in
Italy andSpain ), partly offset by lower market share (notably inItaly andPoland , partially reflecting out-switching to heated tobacco units).
Excluding the net favorable impact of estimated distributor inventory movements, PMI's total in-market sales in the Region increased by 3.1%.
Financial Summary - |
|
|
|
|
Change |
|
Variance |
||||||||||||||||
|
2020 |
2019 |
|
Total |
Excl. |
|
Total |
Cur- |
Price |
Vol/ |
Cost/ |
||||||||||||
(in millions) |
|
|
|
||||||||||||||||||||
Net Revenues |
|
|
|
|
|
|
36.1 |
% |
35.1 |
% |
|
209 |
|
6 |
|
14 |
189 |
— |
|||||
Operating Income |
|
|
|
|
|
|
(23.3 |
)% |
48.1 |
% |
|
(30 |
) |
(92 |
) |
14 |
129 |
(81 |
) |
||||
Asset Impairment & Exit Costs |
|
— |
— |
|
— |
% |
— |
% |
|
— |
— |
— |
— |
— |
|||||||||
Adjusted Operating Income |
|
|
|
|
|
|
(23.3 |
)% |
48.1 |
% |
|
(30 |
) |
(92 |
) |
14 |
129 |
(81 |
) |
||||
Adjusted Operating Income Margin |
|
12.6 |
% |
22.3 |
% |
|
(9.7) |
pp |
2.1 |
pp |
|
|
|
|
|
|
During the quarter, net revenues, excluding favorable currency, increased by 35.1%, mainly reflecting: favorable volume/mix, predominantly driven by higher heated tobacco unit volume in
Operating income, excluding unfavorable currency (primarily related to an adverse transaction currency impact from the revaluation of foreign currency payables in
Adjusted operating income margin, excluding currency, increased by 2.1 points to 24.4%, as detailed in Schedule 7.
Total Market, PMI Shipment & Market Share Commentaries
In the quarter, the estimated total market in
Russia , down by 0.1%, or by 3.9% excluding the net favorable impact of estimated trade inventory movements, primarily reflecting the impact of price increases, as well as an increase in the prevalence of illicit trade; andUkraine , down by 6.5%, mainly reflecting the impact of excise tax-driven price increases.
PMI Shipment Volume |
|
First-Quarter |
||||
(million units) |
|
2020 |
2019 |
Change |
||
Cigarettes |
|
21,419 |
20,320 |
5.4% |
||
Heated Tobacco Units |
|
4,366 |
1,548 |
+100% |
||
Total |
|
25,785 |
21,868 |
17.9% |
PMI's total shipment volume increased by 17.9% to 25.8 billion units, mainly driven by:
Kazakhstan , up by 15.6%, mainly reflecting a higher market share of heated tobacco units; andRussia , up by 24.0%, or by 14.5% excluding the net favorable impact of estimated distributor inventory movements (primarily for cigarettes and driven by distributor inventory increases due to COVID-19), mainly reflecting a higher market share of heated tobacco units.
Financial Summary - |
|
|
|
|
Change |
|
Variance |
|||||||||||||||
|
2020 |
2019 |
|
Total |
Excl. |
|
Total |
Cur- |
Price |
Vol/ |
Cost/ |
|||||||||||
(in millions) |
|
|
|
|||||||||||||||||||
Net Revenues |
|
|
|
|
|
|
(5.5 |
)% |
(5.3 |
)% |
|
(51 |
) |
(2 |
) |
72 |
(76 |
) |
(45 |
) |
||
Operating Income |
|
|
|
|
|
|
(6.7 |
)% |
(1.2 |
)% |
|
(23 |
) |
(19 |
) |
72 |
(30 |
) |
(46 |
) |
||
Asset Impairment & Exit Costs |
|
— |
— |
|
— |
% |
— |
% |
|
— |
— |
— |
— |
— |
||||||||
Adjusted Operating Income |
|
|
|
|
|
|
(6.7 |
)% |
(1.2 |
)% |
|
(23 |
) |
(19 |
) |
72 |
(30 |
) |
(46 |
) |
||
Adjusted Operating Income Margin |
|
36.6 |
% |
37.1 |
% |
|
(0.5) |
pp |
1.6 |
pp |
|
|
|
|
|
|
During the quarter, net revenues, excluding unfavorable currency, decreased by 5.3%, reflecting: unfavorable volume/mix, mainly due to lower heated tobacco unit and IQOS device volume in PMI Duty Free and lower cigarette volume (notably in
Operating income, excluding unfavorable currency, decreased by 1.2%, reflecting: unfavorable volume/mix, mainly due to lower heated tobacco unit volume in PMI Duty Free and lower cigarette volume (notably in
Adjusted operating income margin, excluding currency, increased by 1.6 points to 38.7%, as detailed in Schedule 7.
Total Market, PMI Shipment & Market Share Commentaries
In the quarter, the estimated total market in the
International Duty Free , down by 33.0%, primarily reflecting the impact of government travel restrictions and reduced passenger traffic due to the COVID-19 pandemic;Saudi Arabia , down by 18.6%, notably reflecting the increased prevalence of non-domestic products following the implementation of plain packaging in the fourth quarter of 2019; andTurkey , down by 24.1%, mainly reflecting a higher prevalence of illicit trade related to cut tobacco following significant industry-wide price increases in 2019;
partly offset by
Egypt , up by 5.9%, partly reflecting a lower prevalence of illicit trade and in-switching to cigarettes from other tobacco products.
PMI Shipment Volume |
|
First-Quarter |
||||
(million units) |
|
2020 |
2019 |
Change |
||
Cigarettes |
|
29,996 |
33,304 |
(9.9)% |
||
Heated Tobacco Units |
|
470 |
754 |
(37.7)% |
||
Total |
|
30,466 |
34,058 |
(10.5)% |
PMI's total shipment volume decreased by 10.5% to 30.5 billion units, notably due to:
- PMI Duty Free, down by 12.8%, or by 28.1% excluding the net favorable impact of estimated distributor inventory movements (driven by cigarettes), mainly reflecting the lower total market;
Saudi Arabia , down by 72.6%. Excluding the net unfavorable impact of estimated distributor inventory movements of 2.3 billion cigarettes, largely attributable to the timing of shipments in 2019, PMI's in-market sales decreased by 20.4%, mainly due to the lower total market; andTurkey , down by 27.0%, mainly reflecting the lower total market and lower market share due primarily to adult smoker down-trading following the price increases;
partly offset by
Egypt , up by 17.1%, or by 6.1% excluding the net favorable impact of estimated distributor inventory movements, mainly reflecting the higher total market.
SOUTH &
Financial Summary - |
|
|
|
|
Change |
|
Variance |
|||||||||||||||
|
2020 |
2019 |
|
Total |
Excl. |
|
Total |
Cur- |
Price |
Vol/ |
Cost/ |
|||||||||||
(in millions) |
|
|
|
|||||||||||||||||||
Net Revenues |
|
|
|
|
|
|
12.4 |
% |
10.7 |
% |
|
138 |
19 |
159 |
(40 |
) |
— |
|||||
Operating Income |
|
|
|
|
|
|
36.1 |
% |
31.8 |
% |
|
159 |
|
19 |
|
159 |
|
(18 |
) |
(1 |
) |
|
Asset Impairment & Exit Costs (1) |
|
— |
(20 |
) |
|
+100 |
% |
+100 |
% |
|
20 |
|
— |
— |
— |
20 |
|
|||||
Adjusted Operating Income |
|
|
|
|
|
|
30.2 |
% |
26.1 |
% |
|
139 |
|
19 |
|
159 |
|
(18 |
) |
(21 |
) |
|
Adjusted Operating Income Margin |
|
47.9 |
% |
41.3 |
% |
|
6.6 |
pp |
5.8 |
pp |
|
|
|
|
|
|
||||||
(1) Included in marketing, administration and research costs at the consolidated operating income level. |
During the quarter, net revenues, excluding favorable currency, increased by 10.7%, reflecting a favorable pricing variance, principally driven by
Operating income, excluding favorable currency, increased by 31.8%, partly reflecting a favorable comparison to a charge recorded in the first quarter of 2019, shown in "Cost/Other," for asset impairment and exit costs related to a plant closure in
Excluding the impact of the 2019 charge, adjusted operating income, excluding favorable currency, increased by 26.1%, reflecting a favorable pricing variance, partly offset by unfavorable volume/mix, due to the same factors as for net revenues noted above, and higher marketing, administration and research costs.
Adjusted operating income margin, excluding currency, increased by 5.8 points to 47.1%, as detailed in Schedule 7.
Total Market, PMI Shipment & Market Share Commentaries
In the quarter, the estimated total market in South &
Indonesia , down by 0.6%, or by approximately 7% excluding the net favorable impact of estimated trade inventory movements, mainly reflecting the impact of excise tax-driven price increases;Pakistan , down by 25.3%, or by 41.9% excluding the net favorable impact of estimated trade inventory movements, mainly due to the impact of excise tax-driven price increases inJune 2019 ; andthe Philippines , down by 8.9%, or by 13.2% excluding the net favorable impact of estimated trade inventory movements, mainly reflecting the impact of industry-wide price increases in the third quarter of 2019 and the implementation of quarantines related to COVID-19 in select geographies beginning inmid-March 2020 .
PMI Shipment Volume |
|
First-Quarter |
||||
(million units) |
|
2020 |
2019 |
Change |
||
Cigarettes |
|
37,595 |
41,492 |
(9.4)% |
||
Heated Tobacco Units |
|
— |
— |
—% |
||
Total South & |
|
37,595 |
41,492 |
(9.4)% |
PMI's total shipment volume decreased by 9.4% to 37.6 billion units, notably due to:
Indonesia , down by 7.6%, primarily reflecting lower market share, mainly due toMarlboro and Dji Sam Soe Magnum Mild, partly offset by Sampoerna A;Pakistan , down by 35.0%, mainly due to the lower total market; andthe Philippines , down by 8.8%, mainly reflecting the lower total market.
Financial Summary - |
|
|
|
|
Change |
|
Variance |
|||||||||||||||
|
2020 |
2019 |
|
Total |
Excl. |
|
Total |
Cur- |
Price |
Vol/ |
Cost/ |
|||||||||||
(in millions) |
|
|
|
|||||||||||||||||||
Net Revenues |
|
|
|
|
|
|
(5.0 |
)% |
(4.3 |
)% |
|
(66 |
) |
(9 |
) |
13 |
(70 |
) |
— |
|||
Operating Income |
|
|
|
|
|
|
13.8 |
% |
14.8 |
% |
|
59 |
|
(4 |
) |
13 |
|
(11 |
) |
61 |
||
Asset Impairment & Exit Costs |
|
— |
|
— |
|
|
— |
% |
— |
% |
|
— |
— |
— |
— |
— |
||||||
Adjusted Operating Income |
|
|
|
|
|
|
13.8 |
% |
14.8 |
% |
|
59 |
|
(4 |
) |
13 |
|
(11 |
) |
61 |
||
Adjusted Operating Income Margin |
|
38.7 |
% |
32.3 |
% |
|
6.4 |
pp |
6.5 |
pp |
|
|
|
|
|
|
During the quarter, net revenues, excluding unfavorable currency, decreased by 4.3%, reflecting: unfavorable volume/mix, mainly due to lower IQOS device volume in
Operating income, excluding unfavorable currency, increased by 14.8%, mainly reflecting lower manufacturing costs related to
Adjusted operating income margin, excluding currency, increased by 6.5 points to 38.8%, as detailed in Schedule 7.
Total Market, PMI Shipment & Market Share Commentaries
In the quarter, the estimated total market in
Australia , down by 19.1%, or by 7.9% excluding the net unfavorable impact of estimated trade inventory movements, mainly due to the impact of excise tax-driven retail price increases;Japan , down by 5.7%, mainly reflecting adult smoker out-switching from cigarettes to the cigarillo category; andTaiwan , down by 14.4%, or by 3.2% excluding the net unfavorable impact of estimated trade inventory movements, notably due to an increase in the prevalence of illicit trade.
PMI Shipment Volume |
|
First-Quarter |
||||
(million units) |
|
2020 |
2019 |
Change |
||
Cigarettes |
|
12,299 |
12,113 |
1.5% |
||
Heated Tobacco Units |
|
7,122 |
6,849 |
4.0% |
||
Total |
|
19,421 |
18,962 |
2.4% |
PMI's total shipment volume increased by 2.4% to 19.4 billion units, notably in:
Japan , up by 5.6%, reflecting the net favorable impact of estimated distributor inventory movements of approximately 0.8 billion units (driven by a 0.9 billion favorable impact for cigarettes), partly due to accelerated cigarette and heated tobacco unit shipments to the distributor related to COVID-19. Excluding the impact of these inventory movements, PMI's in-market sales decreased by 0.9%, mainly due to the lower total market, partly offset by higher heated tobacco unit market share.
Financial Summary - |
|
|
|
|
Change |
|
Variance |
||||||||||||||
|
2020 |
2019 |
|
Total |
Excl. |
|
Total |
Cur- |
Price |
Vol/ |
Cost/ |
||||||||||
(in millions) |
|
|
|
||||||||||||||||||
Net Revenues |
|
|
|
|
|
|
(31.3 |
)% |
(28.5 |
)% |
|
(204 |
) |
(18 |
) |
49 |
(52 |
) |
(183 |
) |
|
Operating Income |
|
|
|
$ (186 |
) |
|
+100 |
% |
+100 |
% |
|
312 |
|
(35 |
) |
49 |
|
(38 |
) |
336 |
|
Asset Impairment & Exit Costs |
|
— |
|
— |
|
|
— |
% |
— |
% |
|
— |
— |
— |
— |
— |
|||||
Canadian Tobacco Litigation-Related Expense (2) |
|
— |
(194 |
) |
|
+100 |
% |
+100 |
% |
|
194 |
|
— |
— |
— |
194 |
|
||||
Loss on Deconsolidation of RBH (2) |
|
— |
(239 |
) |
|
+100 |
% |
+100 |
% |
|
239 |
|
— |
— |
— |
239 |
|
||||
Adjusted Operating Income |
|
|
|
|
|
|
(49.0 |
)% |
(34.8 |
)% |
|
(121 |
) |
(35 |
) |
49 |
|
(38 |
) |
(97 |
) |
Adjusted Operating Income Margin |
|
28.1 |
% |
37.9 |
% |
|
(9.8) |
pp |
(3.4) |
pp |
|
|
|
|
|
|
|||||
(1) Unfavorable Cost/Other variance includes the impact of the RBH deconsolidation. |
|||||||||||||||||||||
(2) Included in marketing, administration and research costs at the consolidated operating income level. |
|||||||||||||||||||||
Note: Net Revenues include revenues from shipments of Platform 1 devices, heated tobacco units and accessories to Altria Group, Inc., commencing in the third quarter of 2019, for sale under license in |
During the quarter, net revenues, excluding unfavorable currency, decreased by 28.5%, reflecting: the unfavorable impact of the deconsolidation of RBH shown in "Cost/Other"; and unfavorable volume/mix, notably lower cigarette volume in
Operating income, excluding unfavorable currency, increased by +100%, notably reflecting a favorable comparison to charges recorded in the first quarter of 2019 of
Excluding the impact of these 2019 charges, adjusted operating income, excluding unfavorable currency, decreased by 34.8%, reflecting: the unfavorable impact of the deconsolidation of RBH, included in "Cost/Other"; and unfavorable volume/mix, due to the same factors as for net revenues noted above; partly offset by a favorable pricing variance and lower marketing, administration and research costs. On a like-for-like basis, excluding unfavorable currency, adjusted operating income increased by 30.3%, as detailed in Schedule 9.
Adjusted operating income margin, excluding currency, decreased by 3.4 points to 34.5%, as detailed in Schedule 7, or increased by 8.2 points to 34.0% on a like-for-like basis, as detailed in Schedule 9.
Total Market, PMI Shipment & Market Share Commentaries
In the quarter, the estimated total market in
Argentina , down by 5.7%, mainly reflecting the impact of price increases; andMexico , down by 10.5%, mainly due to the impact of excise tax-driven price increases inJanuary 2020 ;
partly offset by
Brazil , up by 10.3%, mainly reflecting a lower prevalence of illicit trade due to reduced price gaps with legal products and improved macro-economic conditions.
PMI Shipment Volume |
|
First-Quarter |
||||
(million units) |
|
2020 |
2019 |
Change |
||
Cigarettes |
|
15,063 |
17,580 |
(14.3)% |
||
Heated Tobacco Units |
|
108 |
54 |
+100% |
||
Total |
|
15,171 |
17,634 |
(14.0)% |
PMI's total shipment volume decreased by 14.0% to 15.2 billion units, or by 8.8% on a like-for-like basis, notably due to:
Argentina , down by 13.2%, primarily reflecting a lower market share due to adult smoker down-trading to ultra-low-price brands produced by local manufacturers, as well as the lower total market; andMexico , down by 14.0%, mainly due to the lower total market and lower market share due to adult smoker down-trading.
Forward-Looking and Cautionary Statements
This press release contains projections of future results and other forward-looking statements. Achievement of future results is subject to risks, uncertainties and inaccurate assumptions. In the event that risks or uncertainties materialize, or underlying assumptions prove inaccurate, actual results could vary materially from those contained in such forward-looking statements. Pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, PMI is identifying important factors that, individually or in the aggregate, could cause actual results and outcomes to differ materially from those contained in any forward-looking statements made by PMI.
PMI's business risks include: excise tax increases and discriminatory tax structures; increasing marketing and regulatory restrictions that could reduce our competitiveness, eliminate our ability to communicate with adult consumers, or ban certain of our products; health concerns relating to the use of tobacco and other nicotine-containing products and exposure to environmental tobacco smoke; litigation related to tobacco use; intense competition; the effects of global and individual country economic, regulatory and political developments, natural disasters and conflicts; changes in adult smoker behavior; lost revenues as a result of counterfeiting, contraband and cross-border purchases; governmental investigations; unfavorable currency exchange rates and currency devaluations, and limitations on the ability to repatriate funds; adverse changes in applicable corporate tax laws; adverse changes in the cost and quality of tobacco and other agricultural products and raw materials; and the integrity of its information systems and effectiveness of its data privacy policies. PMI's future profitability may also be adversely affected should it be unsuccessful in its attempts to produce and commercialize reduced-risk products or if regulation or taxation do not differentiate between such products and cigarettes; if it is unable to successfully introduce new products, promote brand equity, enter new markets or improve its margins through increased prices and productivity gains; if it is unable to expand its brand portfolio internally or through acquisitions and the development of strategic business relationships; or if it is unable to attract and retain the best global talent. Future results are also subject to the lower predictability of our reduced-risk product category's performance.
The COVID-19 pandemic has created significant societal and economic disruption, and resulted in closures of stores, factories and offices, and restrictions on manufacturing, distribution and travel, all of which will adversely impact our business, results of operations, cash flows and financial position during the continuation of the pandemic. Although we have business continuity plans and other safeguards in place, there is no assurance that such plans and safeguards will be effective. While much of the COVID-19 pandemic and its effect on our business is still unknown, currently, significant risks include our diminished ability to convert adult smokers to our RRPs, significant volume declines in our duty-free business and certain other key markets, disruptions or delays in our manufacturing and supply chain, increased currency volatility, and delays in certain cost saving, transformation and restructuring initiatives. Our business could also be adversely impacted if key personnel or a significant number of employees or business partners become unavailable due to the COVID-19 outbreak. The significant adverse impact of COVID-19 on the economic or political conditions in markets in which we operate could result in changes to the preferences of our adult consumers, lower demand for our products, particularly for our mid-price or premium-price brands, and increased illicit trade. Continuation of the pandemic could disrupt our access to the credit markets or increase our borrowing costs. Governments may temporarily be unable to focus on the development of science-based regulatory frameworks for the development and commercialization of RRPs or on the enforcement or implementation of regulations that are significant to our business. In addition, messaging about the potential negative impacts of the use of our products on COVID-19 risks may lead to increasingly restrictive regulatory measures on the sale and use of our products, negatively impact demand for our products, the willingness of adult consumers to switch to our RRPs and our efforts to advocate for the development of science-based regulatory frameworks for the development and commercialization of RRPs.
Despite our efforts to manage these risks, their impact also depends on factors beyond our knowledge or control, including the duration and severity of the outbreak and actions taken to contain its spread and to mitigate its public health effects, and the ultimate economic consequences thereof.
PMI is further subject to other risks detailed from time to time in its publicly filed documents, including the Form 10-K for the year ended
Key Terms, Definitions and Explanatory Notes
General
- "PMI" refers to
Philip Morris International Inc. and its subsidiaries. Trademarks and service marks that are the registered property of, or licensed by, the subsidiaries of PMI, are italicized. - Comparisons are made to the same prior-year period unless otherwise stated.
- Unless otherwise stated, references to total industry, total market, PMI shipment volume and PMI market share performance reflect cigarettes and heated tobacco units.
- References to total international market, defined as worldwide cigarette and heated tobacco unit volume excluding the
U.S. , total industry, total market and market shares are PMI estimates for tax-paid products based on the latest available data from a number of internal and external sources and may, in defined instances, excludethe People's Republic of China and/or PMI's duty free business. In addition, to reflect the deconsolidation of PMI's Canadian subsidiary,Rothmans, Benson & Hedges, Inc. (RBH), effectiveMarch 22, 2019 , PMI's total market share has been restated for previous periods. - "OTP" is defined as "other tobacco products," primarily roll-your-own and make-your-own cigarettes, pipe tobacco, cigars and cigarillos, and does not include reduced-risk products.
- "Combustible products" is the term PMI uses to refer to cigarettes and OTP, combined.
- In-market sales, or "IMS," is defined as sales to the retail channel, depending on the market and distribution model.
- "Total shipment volume" is defined as the combined total of cigarette shipment volume and heated tobacco unit shipment volume.
- "
North Africa " is defined asAlgeria ,Egypt ,Libya ,Morocco andTunisia . - "The GCC" (
Gulf Cooperation Council ) is defined asBahrain ,Kuwait ,Oman ,Qatar ,Saudi Arabia and theUnited Arab Emirates (UAE ). - Following the deconsolidation of PMI's Canadian subsidiary,
Rothmans, Benson & Hedges, Inc. (RBH), PMI will continue to report the volume of brands sold by RBH for which other PMI subsidiaries are the trademark owner. These include HEETS, Next, Philip Morris and Rooftop. - From time to time, PMI’s shipment volumes are subject to the impact of distributor inventory movements, and estimated total industry/market volumes are subject to the impact of inventory movements in various trade channels that include estimated trade inventory movements of PMI’s competitors arising from market-specific factors that significantly distort reported volume disclosures. Such factors may include changes to the manufacturing supply chain, shipment methods, consumer demand, timing of excise tax increases or other influences that may affect the timing of sales to customers. In such instances, in addition to reviewing PMI shipment volumes and certain estimated total industry/market volumes on a reported basis, management reviews these measures on an adjusted basis that excludes the impact of distributor and/or estimated trade inventory movements. Management also believes that disclosing PMI shipment volumes and estimated total industry/market volumes in such circumstances on a basis that excludes the impact of distributor and/or estimated trade inventory movements, such as on an IMS basis, improves the comparability of performance and trends for these measures over different reporting periods.
Financial
- Net revenues related to combustible products refer to the operating revenues generated from the sale of these products, including shipping and handling charges billed to customers, net of sales and promotion incentives, and excise taxes. PMI recognizes revenue when control is transferred to the customer, typically either upon shipment or delivery of goods.
- Net revenues related to RRPs represent the sale of heated tobacco units, IQOS devices and related accessories, and other nicotine-containing products, primarily e-vapor products, including shipping and handling charges billed to customers, net of sales and promotion incentives, and excise taxes. PMI recognizes revenue when control is transferred to the customer, typically either upon shipment or delivery of goods.
- "Cost of sales" consists principally of: tobacco leaf, non-tobacco raw materials, labor and manufacturing costs; shipping and handling costs; and the cost of IQOS devices produced by third-party electronics manufacturing service providers. Estimated costs associated with IQOS warranty programs are generally provided for in cost of sales in the period the related revenues are recognized.
- "Marketing, administration and research costs" include the costs of marketing and selling our products, other costs generally not related to the manufacture of our products (including general corporate expenses), and costs incurred to develop new products. The most significant components of our marketing, administration and research costs are marketing and sales expenses and general and administrative expenses.
- "Cost/Other" in the Consolidated Financial Summary table of total PMI and the six operating segments of this release reflects the currency-neutral variances of: cost of sales (excluding the volume/mix cost component); marketing, administration and research costs (including asset impairment and exit costs, the Canadian tobacco litigation-related expense and the charge related to the deconsolidation of RBH in
Canada ); and amortization of intangibles. “Cost/Other” also includes the currency-neutral net revenue variance, unrelated to volume/mix and price components, attributable to fees for certain distribution rights billed to customers in certain markets in theME&A Region , as well as the impact of the deconsolidation in RBH. - "Adjusted Operating Income Margin" is calculated as adjusted operating income, divided by net revenues.
- "Adjusted EBITDA" is defined as earnings before interest, taxes, depreciation, amortization and equity (income)/loss in unconsolidated subsidiaries, excluding asset impairment and exit costs, and unusual items.
- "Net debt" is defined as total debt, less cash and cash equivalents.
- Management reviews net revenues, OI, OI margins, operating cash flow and earnings per share, or "EPS," on an adjusted basis, which may exclude the impact of currency and other items such as acquisitions, asset impairment and exit costs, tax items and other special items. For example, PMI’s adjusted diluted EPS and other impacted results reflect the loss on deconsolidation of RBH and the Canadian tobacco litigation-related expense, recorded in the first quarter of 2019, and the
Russia excise & VAT charge, recorded in the third quarter of 2019. PMI believes that the adjusted measures, including pro forma measures, will provide useful insight into underlying business trends and results, and will provide a more meaningful performance comparison for the period during which RBH remains under CCAA protection. For PMI's 2018 pro forma adjusted diluted EPS by quarter and year-to-date, see Schedule 3 in PMI's first-quarter 2019 earnings release. - Management reviews these measures because they exclude changes in currency exchange rates and other factors that may distort underlying business trends, thereby improving the comparability of PMI’s business performance between reporting periods. Furthermore, PMI uses several of these measures in its management compensation program to promote internal fairness and a disciplined assessment of performance against company targets. PMI discloses these measures to enable investors to view the business through the eyes of management.
- Non-GAAP measures used in this release should neither be considered in isolation nor as a substitute for the financial measures prepared in accordance with
U.S. GAAP. For a reconciliation of non-GAAP measures to the most directly comparableU.S. GAAP measures, see the relevant schedules provided with this press release. U.S. GAAP Treatment ofArgentina as a Highly Inflationary Economy. Following the categorization ofArgentina by theInternational Practices Task Force of theCenter for Audit Quality as a country with a three-year cumulative inflation rate greater than 100%, the country is considered highly inflationary in accordance withU.S. GAAP. Consequently, PMI began to account for the operations of its Argentinian affiliates as highly inflationary, and to treat theU.S. dollar as the functional currency of the affiliates, effectiveJuly 1, 2018 .- "Fair value adjustment for equity security investments" reflects the adjustment resulting from share price movements in passive investments for publicly traded entities that are not controlled or influenced by PMI. Under
U.S. GAAP, such adjustments are required, sinceJanuary 1, 2018 , to be reflected directly in the income statement. - The estimated impact from the COVID-19 pandemic primarily reflects management’s estimate for shipments to distributors and trade partners that have been made solely for the purpose of increasing safety stocks. The impact also includes the estimated reduction of shipments to duty free distributors and trade partners resulting from the pandemic-related decline in international travel.
Reduced-Risk Products
- Reduced Risk Products (“RRPs”) is the term PMI uses to refer to products that present, are likely to present, or have the potential to present less risk of harm to smokers who switch to these products versus continuing smoking. PMI has a range of RRPs in various stages of development, scientific assessment and commercialization. PMI's RRPs are smoke-free products that produce an aerosol that contains far lower quantities of harmful and potentially harmful constituents than found in cigarette smoke.
- "Heated tobacco units," or "HTUs," is the term PMI uses to refer to heated tobacco consumables, which include the company's HEETS, HEETS Creations, HEETS Marlboro and HEETS FROM
MARLBORO , defined collectively as HEETS, as well asMarlboro HeatSticks and Parliament HeatSticks. - Unless otherwise stated, all references to IQOS are to PMI's heat-not-burn products.
- The IQOS heat-not-burn device is a precisely controlled heating device into which a specially designed and proprietary tobacco unit is inserted and heated to generate an aerosol.
- “Total IQOS users” is defined as the estimated number of Legal Age (minimum 18 years) IQOS users that used PMI HTUs for at least 5% of their daily tobacco consumption over the past seven days.
- The estimated number of people who have "stopped smoking and switched to IQOS" is defined as: for markets where IQOS is the only heat-not-burn product, daily individual consumption of PMI HTUs represents the totality of their daily tobacco consumption in the past seven days; for markets where IQOS is one among other heat-not-burn products, daily individual consumption of HTUs represents the totality of their daily tobacco consumption in the past seven days, of which at least 70% are PMI HTUs.
IQOS in
- On
April 30, 2019 , theU.S. Food and Drug Administration (FDA) announced that the marketing of a version of IQOS, PMI's heat-not-burn product, together with its heated tobacco units (the term PMI uses to refer to heated tobacco consumables), is appropriate for the protection of public health and authorized it for sale in theU.S. The FDA’s decision follows its comprehensive assessment of PMI’s premarket tobacco product applications (PMTAs) submitted to the Agency in 2017. In the third quarter of 2019, PMI brought a version of its IQOS Platform 1 device and three variants of its heated tobacco units to theU.S. through its license with Altria Group, Inc., whose subsidiary,Philip Morris USA Inc. , is responsible for marketing the product and complying with the provisions set forth in theFDA's marketing order. OnMarch 30, 2020 , PMI submitted a supplemental PMTA for the IQOS 3 tobacco heating device with the FDA. - Shipment volume of heated tobacco units to the
U.S. is included in the heated tobacco unit shipment volume of theLatin America &Canada segment. Revenues from shipments of Platform 1 devices, heated tobacco units and accessories to Altria Group, Inc. for sale under license in theU.S. are included in Net Revenues of theLatin America &Canada segment.
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Appendix 1 |
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Key Market Data |
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Quarters Ended |
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Market |
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Total Market, |
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PMI Shipments, bio units |
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PMI Market Share, % (1) |
|||||||||||||||||||||||||||||||||||||
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Total |
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Cigarette |
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HTU |
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Total |
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HTU |
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|
2020 |
2019 |
% |
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2020 |
2019 |
% |
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2020 |
2019 |
% |
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2020 |
2019 |
% |
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2020 |
2019 |
pp |
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2020 |
2019 |
pp |
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Total |
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606.6 |
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624.7 |
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(2.9 |
) |
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173.7 |
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175.8 |
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(1.2 |
) |
|
157.0 |
|
164.3 |
|
(4.4 |
) |
|
16.7 |
|
11.5 |
|
45.5 |
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27.9 |
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28.1 |
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(0.2 |
) |
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2.9 |
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2.0 |
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0.9 |
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8.3 |
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9.1 |
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(8.7 |
) |
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4.0 |
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4.2 |
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(3.0 |
) |
|
4.0 |
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4.1 |
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(3.8 |
) |
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— |
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— |
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— |
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44.5 |
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45.0 |
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(0.5 |
) |
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0.4 |
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0.2 |
|
0.2 |
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|
|
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16.0 |
|
15.4 |
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3.7 |
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6.7 |
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6.1 |
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10.8 |
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6.4 |
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5.9 |
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7.3 |
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0.4 |
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0.2 |
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+100 |
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42.2 |
|
39.5 |
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2.7 |
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2.4 |
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1.0 |
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1.4 |
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15.7 |
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15.6 |
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0.6 |
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9.2 |
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7.7 |
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19.1 |
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7.8 |
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7.1 |
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8.9 |
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1.4 |
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0.6 |
|
+100 |
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51.9 |
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51.0 |
|
0.9 |
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7.4 |
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3.7 |
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3.7 |
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10.8 |
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10.6 |
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2.0 |
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4.3 |
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4.2 |
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2.4 |
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3.9 |
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4.0 |
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(4.3 |
) |
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0.5 |
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0.2 |
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+100 |
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40.0 |
|
39.9 |
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0.1 |
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4.3 |
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1.8 |
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2.5 |
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10.4 |
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10.2 |
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1.8 |
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3.7 |
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3.6 |
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1.8 |
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3.5 |
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3.5 |
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(0.4 |
) |
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0.1 |
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0.1 |
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+100 |
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31.0 |
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31.7 |
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(0.7 |
) |
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0.9 |
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0.6 |
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0.3 |
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46.6 |
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46.7 |
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(0.1 |
) |
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15.0 |
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12.1 |
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24.0 |
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12.4 |
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11.3 |
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9.8 |
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2.6 |
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0.8 |
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+100 |
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32.6 |
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28.4 |
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4.2 |
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6.5 |
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3.0 |
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3.5 |
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4.3 |
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5.3 |
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(18.6 |
) |
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1.1 |
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3.8 |
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(72.6 |
) |
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1.0 |
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3.8 |
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(72.8 |
) |
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— |
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— |
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— |
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40.8 |
|
41.7 |
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(0.9 |
) |
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— |
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— |
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— |
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22.4 |
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29.5 |
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(24.1 |
) |
|
10.2 |
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13.9 |
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(27.0 |
) |
|
10.2 |
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13.9 |
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(27.0 |
) |
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— |
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— |
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— |
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45.1 |
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47.2 |
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(2.1 |
) |
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— |
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— |
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— |
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South & |
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67.2 |
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67.6 |
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(0.6 |
) |
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20.4 |
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22.1 |
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(7.6 |
) |
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20.4 |
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22.1 |
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(7.6 |
) |
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— |
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— |
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— |
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30.4 |
|
32.7 |
|
(2.3 |
) |
|
— |
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— |
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— |
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|
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|
15.3 |
|
16.8 |
|
(8.9 |
) |
|
10.7 |
|
11.7 |
|
(8.8 |
) |
|
10.7 |
|
11.7 |
|
(8.8 |
) |
|
— |
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— |
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— |
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|
70.2 |
|
70.1 |
|
0.1 |
|
|
— |
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— |
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— |
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|
2.5 |
|
3.1 |
|
(19.1 |
) |
|
0.7 |
|
0.8 |
|
(7.2 |
) |
|
0.7 |
|
0.8 |
|
(7.2 |
) |
|
— |
|
— |
|
— |
|
|
28.0 |
|
24.4 |
|
3.6 |
|
|
— |
|
— |
|
— |
|
|
|
|
35.5 |
|
37.7 |
|
(5.7 |
) |
|
12.8 |
|
12.1 |
|
5.6 |
|
|
6.8 |
|
6.5 |
|
5.6 |
|
|
6.0 |
|
5.7 |
|
5.6 |
|
|
36.3 |
|
34.5 |
|
1.8 |
|
|
19.1 |
|
17.0 |
|
2.1 |
|
|
|
|
16.2 |
|
15.6 |
|
3.6 |
|
|
3.5 |
|
3.6 |
|
(2.8 |
) |
|
2.4 |
|
2.5 |
|
(1.2 |
) |
|
1.1 |
|
1.2 |
|
(6.2 |
) |
|
21.8 |
|
23.3 |
|
(1.5 |
) |
|
6.6 |
|
7.3 |
|
(0.7 |
) |
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|
8.0 |
|
8.5 |
|
(5.7 |
) |
|
5.3 |
|
6.1 |
|
(13.2 |
) |
|
5.3 |
|
6.1 |
|
(13.2 |
) |
|
— |
|
— |
|
— |
|
|
66.1 |
|
72.3 |
|
(6.2 |
) |
|
— |
|
— |
|
— |
|
|
|
|
6.7 |
|
7.4 |
|
(10.5 |
) |
|
4.1 |
|
4.7 |
|
(14.0 |
) |
|
4.1 |
|
4.7 |
|
(14.2 |
) |
|
— |
|
— |
|
— |
|
|
61.1 |
|
63.6 |
|
(2.5 |
) |
|
0.2 |
|
— |
|
0.2 |
|
|
|
|
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|
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|
||||||||||||||||||
(1) Market share estimates are calculated using IMS data |
|||||||||||||||||||||||||||||||||||||||||||
Note: % change for Total Market and PMI shipments is computed based on millions of units; PMI Market Share estimates for previous periods are restated to reflect RBH deconsolidation and exclude RBH-owned brands. |
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|
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|
|
|
Appendix 2 |
|
|||
|
|
||||||||||
|
Reconciliation of Non-GAAP Measures |
||||||||||
|
Shipment Volume Adjusted for the Impact of RBH Deconsolidation and COVID-19 |
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|
(in million units) / (Unaudited) |
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|||
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|
|||
|
Total PMI |
|
Quarters Ended |
|
|||||||
|
|
|
2020 |
2019 |
% Change |
|
|||||
|
Total Shipment Volume |
|
173,745 |
|
175,795 |
|
(1.2 |
)% |
|
||
|
Shipment Volume for RBH-owned brands (1) |
|
|
|
(1,008 |
) |
(2) |
|
|
||
|
Total Shipment Volume |
|
173,745 |
|
174,787 |
(3) |
(0.6 |
)% |
|
||
|
Estimated impact related to COVID-19 |
|
(3,000 |
) |
|
|
|
|
|
||
|
Total Shipment Volume |
|
170,745 |
(4) |
174,787 |
(3) |
(2.3 |
)% |
|
||
|
|
|
|
|
|
|
|
|
|||
|
Total Cigarette Shipment Volume |
|
157,018 |
|
164,297 |
|
(4.4 |
)% |
|
||
|
Shipment Volume for RBH-owned brands (1) |
|
|
|
(1,008 |
) |
(2) |
|
|
||
|
Total Cigarette Shipment Volume |
|
157,018 |
|
163,289 |
(3) |
(3.8 |
)% |
|
||
|
Estimated impact related to COVID-19 |
|
(2,600 |
) |
|
|
|
|
|
||
|
Total Cigarette Shipment Volume |
|
154,418 |
(4) |
163,289 |
(3) |
(5.4 |
)% |
|
||
|
|
|
|
|
|
|
|
|
|||
|
Total HTU Shipment Volume |
|
16,727 |
|
11,498 |
|
45.5 |
% |
|
||
|
Estimated impact related to COVID-19 |
|
(400 |
) |
|
|
|
|
|
||
|
Total HTU Shipment Volume |
|
16,327 |
(4) |
11,498 |
|
42.0 |
% |
|
||
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|||
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|
|||
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|
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|
|
|
|||
|
Total Shipment Volume |
|
15,171 |
|
17,634 |
|
(14.0 |
)% |
|
||
|
Shipment Volume for RBH-owned brands |
|
|
|
(995 |
) |
(2) |
|
|
||
|
Total Shipment Volume |
|
15,171 |
|
16,639 |
(3) |
(8.8 |
)% |
|
||
|
|
|
|
|
|
|
|
|
|||
|
(1) Includes Duty Free sales in |
|
|||||||||
|
(2) Represents volume for RBH-owned brands from |
|
|||||||||
|
(3) Pro forma |
|
|||||||||
|
(4) Pro forma, ex-COVID-19 |
|
|||||||||
|
Note: Shipment Volume includes Cigarettes and Heated Tobacco Units; following the deconsolidation of RBH, we report the volume of brands sold by RBH for which other PMI subsidiaries are the trademark owners |
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|
|
|
Schedule 1 |
|
||||||
|
|
|||||||||||||
Diluted Earnings Per Share (EPS) |
|
|||||||||||||
($ in millions, except per share data) / (Unaudited) |
|
|||||||||||||
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|
|
|
|
|
|
|
|
|
|
||||
|
Diluted EPS |
|
Quarters Ended |
|
||||||||||
|
|
|
|
|||||||||||
|
2020 Diluted Earnings Per Share (1) |
|
|
|
$ |
1.17 |
|
|
|
|
||||
|
2019 Diluted Earnings Per Share (1) |
|
|
|
$ |
0.87 |
|
|
|
|
||||
|
Change |
|
|
|
$ |
0.30 |
|
|
|
|
||||
|
% Change |
|
|
|
34.5 |
% |
|
|
|
|||||
|
|
|
|
|
|
|
|
|
||||||
|
Reconciliation: |
|
|
|
|
|
|
|
||||||
|
2019 Diluted Earnings Per Share (1) |
|
|
|
$ |
0.87 |
|
|
|
|
||||
|
2019 Asset impairment and exit costs |
|
|
|
0.01 |
|
|
|
|
|||||
|
2019 Canadian tobacco litigation-related expense |
|
|
|
0.09 |
|
|
|
|
|||||
|
2019 Loss on deconsolidation of RBH |
|
|
|
0.12 |
|
|
|
|
|||||
|
2019 Tax items |
|
|
|
— |
|
|
|
|
|||||
|
2020 Asset impairment and exit costs |
|
|
|
— |
|
|
|
|
|||||
|
2020 Fair value adjustment for equity security investments |
|
|
|
(0.04 |
) |
|
|
|
|||||
|
2020 Tax items |
|
|
|
— |
|
|
|
|
|||||
|
Currency |
|
|
|
(0.13 |
) |
|
|
|
|||||
|
Interest |
|
|
|
0.01 |
|
|
|
|
|||||
|
Change in tax rate |
|
|
|
(0.01 |
) |
|
|
|
|||||
|
Operations (2) |
|
|
|
0.25 |
|
|
|
|
|||||
|
2020 Diluted Earnings Per Share (1) |
|
|
|
$ |
1.17 |
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
(1) Basic and diluted EPS were calculated using the following (in millions): |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
Quarters Ended |
|
||||||||||
|
|
|
|
|
||||||||||
|
|
|
2020 |
|
2019 |
|
||||||||
|
Net Earnings attributable to PMI |
|
|
|
|
|
||||||||
|
Less: Distributed and undistributed earnings |
|
5 |
|
4 |
|
||||||||
|
Net Earnings for basic and diluted EPS |
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Weighted-average shares for basic EPS |
|
1,557 |
|
1,555 |
|
||||||||
|
Plus Contingently Issuable Performance Stock Units |
|
1 |
|
1 |
|
||||||||
|
Weighted-average shares for diluted EPS |
|
1,558 |
|
1,556 |
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
||||
(2) Includes the impact of shares outstanding and share-based payments |
|
|
|
|
|
|
|
|
Schedule 2 |
|
|||
|
|
||||||||||
Reconciliation of Non-GAAP Measures |
|
||||||||||
Reconciliation of Reported Diluted EPS to Reported Diluted EPS, excluding Currency, |
|
||||||||||
and Reconciliation of Reported Diluted EPS to Adjusted Diluted EPS, excluding Currency |
|
||||||||||
(Unaudited) |
|
||||||||||
|
|
|
|
|
|
|
|
|
|
||
|
|
|
Quarters Ended |
|
|
|
|
||||
|
|
|
2020 |
2019 |
% Change |
|
|
|
|
||
|
Reported Diluted EPS |
|
|
|
34.5 |
% |
|
|
|
|
|
|
Less: Currency |
|
(0.13) |
|
|
|
|
|
|
||
|
Reported Diluted EPS, excluding Currency |
|
|
|
49.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
||
|
|
|
Quarters Ended |
|
|
Year Ended |
|
||||
|
|
|
2020 |
2019 |
% Change |
|
|
2019 |
|
||
|
Reported Diluted EPS |
|
|
|
34.5 |
% |
|
|
|
|
|
|
Asset impairment and exit costs |
|
— |
0.01 |
|
|
|
0.23 |
|
||
|
Canadian tobacco litigation-related expense |
|
— |
0.09 |
|
|
|
0.09 |
|
||
|
Loss on deconsolidation of RBH |
|
— |
0.12 |
|
|
|
0.12 |
|
||
|
|
|
— |
— |
|
|
|
0.20 |
|
||
|
Fair value adjustment for equity security investments |
|
0.04 |
— |
|
|
|
(0.02) |
|
||
|
Tax items |
|
— |
— |
|
|
|
(0.04) |
|
||
|
Adjusted Diluted EPS |
|
|
|
11.0 |
% |
|
|
|
|
|
|
Less: Currency |
|
(0.13) |
|
|
|
|
|
|
||
|
Adjusted Diluted EPS, excluding Currency |
|
|
|
22.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Schedule 3 |
|
|
||||||||||||||||
Reconciliation of Non-GAAP Measures |
||||||||||||||||
Reconciliation of Reported Diluted EPS to Pro Forma Adjusted Diluted EPS |
||||||||||||||||
(Unaudited) |
||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter |
Quarter |
Six Months |
Quarter |
Nine Months |
Quarter |
Year |
|||||||
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
|
2019 |
2019 |
2019 |
2019 |
2019 |
2019 |
2019 |
|||||||
|
Reported Diluted EPS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset impairment and exit costs |
|
0.01 |
|
0.01 |
|
0.02 |
|
0.01 |
|
0.03 |
|
0.20 |
|
0.23 |
|
|
Canadian tobacco litigation-related expense |
|
0.09 |
|
— |
|
0.09 |
|
— |
|
0.09 |
|
— |
|
0.09 |
|
|
Loss on deconsolidation of RBH |
|
0.12 |
|
— |
|
0.12 |
|
— |
|
0.12 |
|
— |
|
0.12 |
|
|
|
|
— |
|
— |
|
— |
|
0.20 |
|
0.20 |
|
— |
|
0.20 |
|
|
Fair value adjustment for equity security investments |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(0.02) |
|
(0.02) |
|
|
Tax items |
|
— |
|
(0.04) |
|
(0.04) |
|
— |
|
(0.04) |
|
— |
|
(0.04) |
|
|
Adjusted Diluted EPS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings attributable to RBH |
|
(0.06) |
(1) |
— |
|
(0.06) |
(1) |
— |
|
(0.06) |
(1) |
— |
|
(0.06) |
(1) |
|
Pro Forma Adjusted Diluted EPS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Represents the impact of net earnings attributable to RBH from |
|||||||||||||||
|
Note: EPS is computed independently for each of the periods presented. Accordingly, the sum of the quarterly EPS amounts may not agree to the total for the year. |
|
|
|
|
|
|
|
|
|
|
|
Schedule 4 |
|
|
||||||||||||
Reconciliation of Non-GAAP Measures |
||||||||||||
Net Revenues by Product Category and Adjustments of Net Revenues for the Impact of Currency and Acquisitions |
||||||||||||
($ in millions) / (Unaudited) |
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Net |
Currency |
Net |
Acquisitions |
Net |
|
Quarters Ended |
|
Net |
|
Total |
Excluding |
Excluding |
2020 |
|
Combustible Products |
|
2019 |
|
% Change |
||||||
|
|
|
$ — |
|
|
|
|
|
|
5.4% |
8.4% |
8.4% |
523 |
(4) |
526 |
— |
526 |
|
|
|
471 |
|
11.1% |
11.8% |
11.8% |
832 |
(2) |
835 |
— |
835 |
|
|
|
829 |
|
0.5% |
0.7% |
0.7% |
1,251 |
19 |
1,232 |
— |
1,232 |
|
South & |
|
1,113 |
|
12.4% |
10.7% |
10.7% |
642 |
(7) |
649 |
— |
649 |
|
|
|
638 |
|
0.6% |
1.8% |
1.8% |
440 |
(18) |
458 |
— |
458 |
|
|
|
646 |
|
(31.9)% |
(29.2)% |
(29.2)% |
|
|
|
$ — |
|
|
Total Combustible |
|
|
|
1.6% |
2.8% |
2.8% |
2020 |
|
Reduced-Risk Products |
|
2019 |
|
% Change |
||||||
|
|
|
$ — |
|
|
|
|
|
|
79.9% |
84.9% |
84.9% |
265 |
10 |
256 |
— |
256 |
|
|
|
108 |
|
+100% |
+100% |
+100% |
44 |
— |
43 |
— |
43 |
|
|
|
98 |
|
(55.7)% |
(56.0)% |
(56.0)% |
— |
— |
— |
— |
— |
|
South & |
|
— |
|
—% |
—% |
—% |
613 |
(2) |
615 |
— |
615 |
|
|
|
683 |
|
(10.2)% |
(10.0)% |
(10.0)% |
8 |
— |
8 |
— |
8 |
|
|
|
6 |
|
38.5% |
41.3% |
41.3% |
|
|
|
$ — |
|
|
Total RRPs |
|
|
|
25.1% |
25.8% |
25.8% |
2020 |
|
PMI |
|
2019 |
|
% Change |
||||||
|
|
|
$ — |
|
|
|
|
|
|
17.4% |
20.7% |
20.7% |
788 |
6 |
782 |
— |
782 |
|
|
|
579 |
|
36.1% |
35.1% |
35.1% |
876 |
(2) |
878 |
— |
878 |
|
|
|
927 |
|
(5.5)% |
(5.3)% |
(5.3)% |
1,251 |
19 |
1,232 |
— |
1,232 |
|
South & |
|
1,113 |
|
12.4% |
10.7% |
10.7% |
1,255 |
(9) |
1,264 |
— |
1,264 |
|
|
|
1,321 |
|
(5.0)% |
(4.3)% |
(4.3)% |
448 |
(18) |
466 |
— |
466 |
|
|
|
652 |
|
(31.3)% |
(28.5)% |
(28.5)% |
|
|
|
$ — |
|
|
Total PMI |
|
|
|
6.0% |
7.1% |
7.1% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Net Revenues include revenues from shipments of Platform 1 devices, heated tobacco units and accessories to Altria Group, Inc., commencing in the third quarter of 2019, for sale under license in |
||||||||||||
Note: Sum of product categories or Regions might not foot to Total PMI due to roundings. “-“ indicates amounts between - |
|
|
|
|
|
|
|
|
|
|
|
|
|
Schedule 5 |
|
|
||||||||||||||
Reconciliation of Non-GAAP Measures |
||||||||||||||
Adjustments of Operating Income for the Impact of Currency and Acquisitions |
||||||||||||||
($ in millions) / (Unaudited) |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating |
Currency |
Operating |
Acquisitions |
Operating |
|
|
|
Operating |
|
Total |
Excluding |
Excluding |
||
2020 |
|
Quarters Ended |
|
2019 |
|
% Change |
||||||||
|
|
|
|
$ — |
|
|
|
|
|
|
|
29.2% |
36.5% |
36.5% |
99 |
|
(92) |
191 |
— |
191 |
|
|
|
129 |
|
|
(23.3)% |
48.1% |
48.1% |
321 |
|
(19) |
340 |
— |
340 |
|
|
|
344 |
|
|
(6.7)% |
(1.2)% |
(1.2)% |
599 |
|
19 |
580 |
— |
580 |
|
South & |
|
440 |
(1) |
|
36.1% |
31.8% |
31.8% |
486 |
|
(4) |
490 |
— |
490 |
|
|
|
427 |
|
|
13.8% |
14.8% |
14.8% |
126 |
|
(35) |
161 |
— |
161 |
|
|
|
(186) |
(2) |
|
+100% |
+100% |
+100% |
|
|
|
|
$ — |
|
|
Total PMI |
|
|
|
|
36.0% |
45.6% |
45.6% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Includes asset impairment and exit costs ( |
||||||||||||||
(2) Includes the Canadian tobacco litigation-related expense ( |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Schedule 6 |
|
|
|||||||||||||||||
Reconciliation of Non-GAAP Measures |
|||||||||||||||||
Reconciliation of Operating Income to Adjusted Operating Income, excluding Currency and Acquisitions |
|||||||||||||||||
($ in millions) / (Unaudited) |
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating |
Asset |
Adjusted |
Currency |
Adjusted |
Acqui- |
Adjusted |
|
|
|
Operating |
Asset |
Adjusted |
|
Total |
Excluding |
Excluding |
|
2020 |
|
Quarters Ended |
2019 |
|
% Change |
||||||||||||
|
$ — |
|
|
|
$ — |
|
|
|
|
|
$ — |
|
|
|
29.2% |
36.5% |
36.5% |
99 |
— |
99 |
(92) |
191 |
— |
191 |
|
|
|
129 |
— |
|
129 |
|
(23.3)% |
48.1% |
48.1% |
321 |
— |
321 |
(19) |
340 |
— |
340 |
|
|
|
344 |
— |
|
344 |
|
(6.7)% |
(1.2)% |
(1.2)% |
599 |
— |
599 |
19 |
580 |
— |
580 |
|
South & |
|
440 |
(20) |
(1) |
460 |
|
30.2% |
26.1% |
26.1% |
486 |
— |
486 |
(4) |
490 |
— |
490 |
|
|
|
427 |
— |
|
427 |
|
13.8% |
14.8% |
14.8% |
126 |
— |
126 |
(35) |
161 |
— |
161 |
|
|
|
(186) |
(433) |
(2) |
247 |
|
(49.0)% |
(34.8)% |
(34.8)% |
|
$ — |
|
|
|
$ — |
|
|
Total PMI |
|
|
|
|
|
|
11.4% |
19.3% |
19.3% |
|
|||||||||||||||||
(1) Represents asset impairment and exit costs |
|||||||||||||||||
(2) Includes the Canadian tobacco litigation-related expense ( |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Schedule 7 |
||
|
||||||||||||||||||||
Reconciliation of Non-GAAP Measures |
||||||||||||||||||||
Reconciliation of Adjusted Operating Income Margin, excluding Currency and Acquisitions |
||||||||||||||||||||
($ in millions) / (Unaudited) |
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted |
Net |
Adjusted |
|
Adjusted |
Net |
Adjusted |
|
Adjusted |
Net |
Adjusted |
|
|
|
Adjusted |
Net |
Adjusted |
|
Adjusted |
Adjusted |
Adjusted |
2020 |
|
Quarters Ended |
|
2019 |
|
% Points Change |
||||||||||||||
|
|
45.7% |
|
|
|
46.9% |
|
|
|
46.9% |
|
|
|
|
41.5% |
|
4.2 |
5.4 |
5.4 |
|
99 |
788 |
12.6% |
|
191 |
782 |
24.4% |
|
191 |
782 |
24.4% |
|
|
129 |
579 |
22.3% |
|
(9.7) |
2.1 |
2.1 |
|
321 |
876 |
36.6% |
|
340 |
878 |
38.7% |
|
340 |
878 |
38.7% |
|
|
344 |
927 |
37.1% |
|
(0.5) |
1.6 |
1.6 |
|
599 |
1,251 |
47.9% |
|
580 |
1,232 |
47.1% |
|
580 |
1,232 |
47.1% |
|
South & |
460 |
1,113 |
41.3% |
|
6.6 |
5.8 |
5.8 |
|
486 |
1,255 |
38.7% |
|
490 |
1,264 |
38.8% |
|
490 |
1,264 |
38.8% |
|
|
427 |
1,321 |
32.3% |
|
6.4 |
6.5 |
6.5 |
|
126 |
448 |
28.1% |
|
161 |
466 |
34.5% |
|
161 |
466 |
34.5% |
|
|
247 |
652 |
37.9% |
|
(9.8) |
(3.4) |
(3.4) |
|
|
|
39.0% |
|
|
|
41.3% |
|
|
|
41.3% |
|
Total PMI |
|
|
37.1% |
|
1.9 |
4.2 |
4.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) For the calculation of Adjusted Operating Income and Adjusted Operating Income excluding currency and acquisitions refer to Schedule 6 |
||||||||||||||||||||
(2) For the calculation of Net Revenues excluding currency and acquisitions refer to Schedule 4 |
|
|
|
|
|
|
|
Schedule 8 |
|
|
|
|
||||||||
|
Reconciliation of Non-GAAP Measures |
||||||||
|
Adjustments for the Impact of RBH, COVID-19, excluding Currency |
||||||||
|
($ in millions, except per share data) / (Unaudited) |
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarters Ended |
|
|||||
|
|
|
2020 |
2019 |
% Change |
|
|||
|
Net Revenues |
|
|
|
|
|
6.0 |
% |
|
|
Net Revenues attributable to RBH |
|
|
|
(181) |
(1) |
|
|
|
|
Net Revenues |
|
|
|
|
(2) |
8.9 |
% |
|
|
Less: Currency |
|
(75) |
|
|
|
|
|
|
|
Net Revenues, ex. currency |
|
|
|
|
(2) |
10.0 |
% |
|
|
Estimated impact related to COVID-19 |
|
(130) |
|
|
|
|
|
|
|
Net Revenues, ex. currency |
|
|
(3) |
|
(2) |
8.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Operating Income (4) |
|
|
|
|
|
11.4 |
% |
|
|
Operating Income attributable to RBH |
|
|
|
(126) |
(1) |
|
|
|
|
Adjusted Operating Income |
|
|
|
|
(2) |
17.3 |
% |
|
|
Less: Currency |
|
(195) |
|
|
|
|
|
|
|
Adjusted Operating Income, ex. currency |
|
|
|
|
(2) |
25.5 |
% |
|
|
Estimated impact related to COVID-19 |
|
(133) |
|
|
|
|
|
|
|
Adjusted Operating Income, ex. currency |
|
|
(3) |
|
(2) |
19.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted OI Margin |
|
39.0% |
|
37.1% |
|
1.9 |
|
|
|
Adjusted OI Margin attributable to RBH |
|
|
|
(0.9) |
(1) |
|
|
|
|
Adjusted OI Margin |
|
39.0% |
|
36.2% |
(2) |
2.8 |
|
|
|
Less: Currency |
|
(2.3) |
|
|
|
|
|
|
|
Adjusted OI Margin, ex. currency |
|
41.3% |
|
36.2% |
(2) |
5.1 |
|
|
|
Estimated impact related to COVID-19 |
|
(1.1) |
|
|
|
|
|
|
|
Adjusted OI Margin, ex. currency |
|
40.2% |
(3) |
36.2% |
(2) |
4.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Diluted EPS (5) |
|
|
|
|
|
11.0 |
% |
|
|
Net earnings attributable to RBH |
|
|
|
(0.06) |
(1) |
|
|
|
|
Adjusted Diluted EPS |
|
|
|
|
(2) |
17.5 |
% |
|
|
Less: Currency |
|
(0.13) |
|
|
|
|
|
|
|
Adjusted Diluted EPS, ex. currency |
|
|
|
|
(2) |
30.1 |
% |
|
|
Estimated impact related to COVID-19 |
|
(0.07) |
|
|
|
|
|
|
|
Adjusted Diluted EPS, ex. currency |
|
|
(3) |
|
(2) |
23.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
(1) Represents the impact attributable to RBH from |
|
|||||||
|
(2) Pro forma |
|
|||||||
|
(3) Pro forma, ex-COVID-19 |
|
|||||||
|
(4) For the calculation of Adjusted Operating Income, see Schedule 6 |
|
|||||||
|
(5) For the calculation, see Schedule 2 |
||||||||
Note: Financials attributable to RBH include Duty Free sales in |
|
|
|
|
|
|
Schedule 9 |
|
|
|||||||
Reconciliation of Non-GAAP Measures |
|||||||
Adjustments for the Impact of RBH, excluding Currency |
|||||||
($ in millions) / (Unaudited) |
|||||||
|
|
|
|
|
|
|
|
|
|
Quarters Ended |
|||||
|
|
2020 |
2019 |
% Change |
|||
Net Revenues |
|
|
|
|
|
(31.3 |
)% |
Net Revenues attributable to RBH |
|
|
|
(179) |
(1) |
|
|
Net Revenues |
|
|
|
|
(2) |
(5.3 |
)% |
Less: Currency |
|
(19) |
|
|
|
|
|
Net Revenues, ex. currency |
|
|
|
|
(2) |
(1.3 |
)% |
|
|
|
|
|
|
|
|
Operating Income |
|
|
|
|
|
+100 |
% |
Less: |
|
|
|
|
|
|
|
Asset impairment and exit costs |
|
— |
|
— |
|
|
|
Canadian tobacco litigation-related expense |
|
— |
|
(194) |
|
|
|
Loss on deconsolidation of RBH |
|
— |
|
(239) |
|
|
|
Adjusted Operating Income |
|
|
|
|
|
(49.0 |
)% |
Operating Income attributable to RBH |
|
|
|
(125) |
(1) |
|
|
Adjusted Operating Income |
|
|
|
|
(2) |
3.3 |
% |
Less: Currency |
|
(33) |
|
|
|
|
|
Adjusted Operating Income, ex. currency |
|
|
|
|
(2) |
30.3 |
% |
|
|
|
|
|
|
|
|
Adjusted OI Margin |
|
28.1% |
|
37.9% |
|
(9.8 |
) |
Adjusted OI Margin attributable to RBH |
|
|
|
(12.1) |
(1) |
|
|
Adjusted OI Margin |
|
28.1% |
|
25.8% |
(2) |
2.3 |
|
Less: Currency |
|
(5.9) |
|
|
|
|
|
Adjusted OI Margin, ex. currency |
|
34.0% |
|
25.8% |
(2) |
8.2 |
|
|
|
|
|
|
|
|
|
(1) Represents the impact attributable to RBH from |
|||||||
(2) Pro forma |
|
|
|
Schedule 10 |
|||
|
||||||
Condensed Statements of Earnings |
||||||
($ in millions, except per share data) / (Unaudited) |
||||||
|
|
|
|
|
||
|
|
Quarters Ended |
||||
|
|
2020 |
2019 |
Change |
||
Revenues including Excise Taxes |
|
|
|
3.1% |
||
Excise Taxes on products |
|
11,100 |
10,954 |
(1.3)% |
||
Net Revenues |
|
7,153 |
6,751 |
6.0% |
||
Cost of sales |
|
2,402 |
2,465 |
2.6% |
||
Gross profit |
|
4,751 |
4,286 |
10.8% |
||
Marketing, administration and research costs (1) |
|
1,944 |
2,217 |
12.3% |
||
Amortization of intangibles |
|
18 |
19 |
|
||
Operating Income |
|
2,789 |
2,050 |
36.0% |
||
Interest expense, net |
|
129 |
152 |
15.1% |
||
Pension and other employee benefit costs |
|
23 |
21 |
(9.5)% |
||
Earnings before income taxes |
|
2,637 |
1,877 |
40.5% |
||
Provision for income taxes |
|
596 |
424 |
(40.6)% |
||
Equity investments and securities (income)/loss, net |
|
54 |
(11) |
|
||
Net Earnings |
|
1,987 |
1,464 |
35.7% |
||
Net Earnings attributable to noncontrolling interests |
|
161 |
110 |
|
||
Net Earnings attributable to PMI |
|
|
|
34.9% |
||
|
|
|
|
|
||
Per share data (2): |
|
|
|
|
||
Basic Earnings Per Share |
|
|
|
34.5% |
||
Diluted Earnings Per Share |
|
|
|
34.5% |
(1) Includes in 2019 asset impairment and exit costs ( |
(2) Net Earnings and weighted-average shares used in the basic and diluted Earnings Per Share computations for the quarters ended |
|
|
|
|
Schedule 11 |
||||||
|
||||||||||
Condensed Balance Sheets |
||||||||||
($ in millions, except ratios) / (Unaudited) |
||||||||||
|
|
|
|
|
|
|
||||
|
|
|
|
|
||||||
|
|
2020 |
|
2019 |
||||||
Assets |
|
|
|
|
|
|
||||
Cash and cash equivalents |
|
|
$ |
3,746 |
|
|
|
$ |
6,861 |
|
All other current assets |
|
|
13,115 |
|
|
|
13,653 |
|
||
Property, plant and equipment, net |
|
|
6,107 |
|
|
|
6,631 |
|
||
|
|
|
5,284 |
|
|
|
5,858 |
|
||
Other intangible assets, net |
|
|
1,850 |
|
|
|
2,113 |
|
||
Investments in unconsolidated subsidiaries and equity securities |
|
|
4,390 |
|
|
|
4,635 |
|
||
Other assets |
|
|
3,002 |
|
|
|
3,124 |
|
||
Total assets |
|
|
$ |
37,494 |
|
|
|
$ |
42,875 |
|
|
|
|
|
|
|
|
||||
Liabilities and Stockholders' (Deficit) Equity |
|
|
|
|
|
|
||||
Short-term borrowings |
|
|
$ |
1,438 |
|
|
|
$ |
338 |
|
Current portion of long-term debt |
|
|
1,933 |
|
|
|
4,051 |
|
||
All other current liabilities |
|
|
13,213 |
|
|
|
14,444 |
|
||
Long-term debt |
|
|
24,999 |
|
|
|
26,656 |
|
||
Deferred income taxes |
|
|
838 |
|
|
|
908 |
|
||
Other long-term liabilities |
|
|
6,136 |
|
|
|
6,077 |
|
||
Total liabilities |
|
|
48,557 |
|
|
|
52,474 |
|
||
|
|
|
|
|
|
|
||||
Total PMI stockholders' deficit |
|
|
(12,944 |
) |
|
|
(11,577 |
) |
||
Noncontrolling interests |
|
|
1,881 |
|
|
|
1,978 |
|
||
Total stockholders' (deficit) equity |
|
|
(11,063 |
) |
|
|
(9,599 |
) |
||
Total liabilities and stockholders' (deficit) equity |
|
|
$ |
37,494 |
|
$ |
42,875 |
|
|
|
|
|
|
|
|
|
|
Schedule 12 |
|||||||||||
|
||||||||||||||||||||
Reconciliation of Non-GAAP Measures |
||||||||||||||||||||
Calculation of Total Debt to Adjusted EBITDA and Net Debt to Adjusted EBITDA Ratios |
||||||||||||||||||||
($ in millions, except ratios) / (Unaudited) |
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
Year Ended |
|
Year Ended |
||||||||||||||||
|
|
April ~ December |
January ~ March |
12 months |
|
|||||||||||||||
|
|
2019 |
2020 |
rolling |
|
|||||||||||||||
Net Earnings |
|
|
$ |
6,264 |
|
|
$ |
1,987 |
|
|
$ |
8,251 |
|
|
|
$ |
7,728 |
|
||
Equity investments and securities (income)/loss, net |
|
|
(138 |
) |
|
54 |
|
|
(84 |
) |
|
|
(149 |
) |
||||||
Provision for income taxes |
|
|
1,869 |
|
|
596 |
|
|
2,465 |
|
|
|
2,293 |
|
||||||
Interest expense, net |
|
|
418 |
|
|
129 |
|
|
547 |
|
|
|
570 |
|
||||||
Depreciation and amortization |
|
|
724 |
|
|
241 |
|
|
965 |
|
|
|
964 |
|
||||||
Asset impairment and exit costs and Others (1) |
|
|
776 |
|
|
— |
|
|
776 |
|
|
|
1,229 |
|
||||||
Adjusted EBITDA |
|
|
$ |
9,913 |
|
|
$ |
3,007 |
|
|
$ |
12,920 |
|
|
|
$ |
12,635 |
|
||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
|
|
|
|
|
|
2020 |
|
2019 |
||||||||||||
Short-term borrowings |
|
|
|
|
|
|
$ |
1,438 |
|
|
|
$ |
338 |
|
||||||
Current portion of long-term debt |
|
|
|
|
|
|
1,933 |
|
|
|
4,051 |
|
||||||||
Long-term debt |
|
|
|
|
|
|
24,999 |
|
|
|
26,656 |
|
||||||||
Total Debt |
|
|
|
|
|
|
$ |
28,370 |
|
|
|
$ |
31,045 |
|
||||||
Cash and cash equivalents |
|
|
|
|
|
|
3,746 |
|
|
|
6,861 |
|
||||||||
Net Debt |
|
|
|
|
|
|
$ |
24,624 |
|
|
|
$ |
24,184 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Ratios: |
|
|
|
|
|
|
|
|
|
|
||||||||||
Total Debt to Adjusted EBITDA |
|
|
|
|
|
|
2.20 |
|
|
|
2.46 |
|
||||||||
Net Debt to Adjusted EBITDA |
|
|
|
|
|
|
1.91 |
|
|
|
1.91 |
|
(1) For the period April to |
|
|
|
Schedule 13 |
|
|||
|
|
||||||
Reconciliation of Non-GAAP Measures |
|
||||||
Reconciliation of Operating Cash Flow to Operating Cash Flow, excluding Currency |
|
||||||
($ in millions) / (Unaudited) |
|
||||||
|
|
|
|
|
|
||
|
|
Quarters Ended |
|
||||
|
|
2020 |
2019 |
% Change |
|
||
Net cash provided by operating activities (1) |
|
|
|
(10.5)% |
|
||
Less: Currency |
|
(50) |
|
|
|
||
Net cash provided by operating activities, excluding currency |
|
|
|
(6.4)% |
|
||
|
|
|
|
|
|
||
(1) Operating cash flow |
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20200421005431/en/
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